When it comes to monitoring our investments, most of us are guilty of creeping inertia. Managers' reports arriving every six months might say that performance is no longer as sparkling as it was a couple of years ago but few people act as a result of the reports, comforting themselves that it is probably a temporary blip.

And indeed it may be exactly that. Transferring a poorly performing PEP to another manager involves both effort and money, so there is no point in panicking every time your fund slips a little way down the performance tables.

But ignore consistent disappointment at your peril - for even if your fund is not losing you money, you are missing out on potential gains. To put it in stark financial terms: over three years to 1 November, pounds 3,000 ploughed into the top-performing PEPable unit trust, TU European, would have grown by more than pounds 3,500 to pounds 6,692, while the same sum in the PEPable funds at the bottom of the league (Hill Samuel UK Smaller Companies, for example) had increased by pounds 158.

The important consideration, however, is not simply by how much a fund has increased, but how it is doing relative to its rivals in the same sector (according to tables produced by Reuters Hindsight or Standard & Poor's).

So it is fairer to compare Hill Samuel's fund with other PEPable smaller companies unit trusts. Duncan Lawrie Smaller Companies, the top performer among them, would have grown from pounds 3,000 to pounds 5,622, which indicates that Hill Samuel's fund, rather than the entire smaller companies sector, is where much of the problem lies.

Where can you track down this kind of information? Monitoring your PEP holdings is less of a challenge than it used to be as comprehensive performance tables are published in the Financial Times each weekend, and also in magazines such as Bloomberg Money. Or you can log on to sites such as www.moneyworld.co.uk or www.iii.co.uk.

Few financial advisers take an active role in highlighting poor performance, though; in fact the one independent financial ad-viser (IFA) to make a virtue out of this is BEST Investment, which names and shames the worst offenders in its quarterly "Spot the Dog" brochure, and offers a free PEP portfolio review service for anyone not certain how their holdings shape up.

BEST's dog funds are calculated by comparing performance against the relevant benchmark index (the FT-SE All-Share index for funds in the UK All Companies sector, for example). When a fund returns less than the benchmark over three consecutive years, the overall level of underperformance is calculated; if it is more than 10 per cent down on the benchmark, the doghouse looms.

Current dog funds include Equitable's Special Situations, a long-standing occupant, while Baillie Gifford British Smaller Companies has lost investors money over three years.

But the dog tables are designed as a starting point for further investigation - a warning light rather than cast-iron evidence of a failing fund. And they can be turned around by a change in investment discipline or management, as has happened at M&G (whose presence in the doghouse has fallen from five funds to two).

Before you make any decisions to transfer a disappointing PEP, therefore, it is helpful to know what a dip in performance may be caused by, as some changes tend to be more far-reaching than others.

Success itself is one possible factor. Good fund managers are a valuable commodity, and frequently poached; the loss of the key strategist can bring real problems for the remaining team members.

Success can also mean a fund attracts so much new money that it becomes unwieldy and slow to respond to market movements.

Company takeovers can also upset a fund's equilibrium as they may involve rationalisation or merging with another fund of quite different investment philosophy.

However, we, the punters, are not usually privy to such inside information. This is where a good financial adviser should have a marked advantage; they have industry contacts through which they are able to pinpoint likely reasons for a serious downturn in fund performance.

The bottom line is one of cost. Transferring PEPs between fund managers amounts to new business as far as charges are concerned, so you will pay 3 to 5 per cent in initial charges through your IFA. You may also pay an exit fee. Few managers do levy such a penalty, but it is worth checking. But if your PEP is a disaster, these costs of transfer will easily be outweighed over the long term.

However, a change of PEP need not be so expensive. If your disappointing holding is a weak link (perhaps in a struggling geographical sector) within a generally strong and reputable stable of funds, it is cheap and easy to switch to a better-performing fund from the same manager, which also suits your investment aims and attitude to risk.

Expect to pay no more than 1 to 2 per cent; some managers will allow you to switch in-house free of charge. Simply drop your fund manager a line and he will do the rest.

If you know where you want to transfer your PEP, do it through a discount broker who will rebate a chunk of the initial commission on the deal.

BEST Investment, Hargreaves Lansdown, Allenbridge and Chelsea Financial Services are among those that discount the entire initial commission on most transfers.

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